Jury Still Out on HAMP

It won't be until the first or second quarter of 2010 that Radian Group Inc., Philadelphia, will find out if there is any benefit from the government Home Affordable Modification Program, said the company's executive vice president and chief financial officer.

Speaking at the FBR Capital Markets Investor Conference, Bob Quint stated that in the fourth quarter of this year is when Radian felt it would see some substantial results from program.

"It's probably not going to be till the first or second quarters of 2010 until we really find out what is going on and just how much the benefit is. Certainly we are encouraged by the number of HAMP loans and we reported in the third quarter about 12,800 of our delinquent loans have been placed in the HAMP program. We think that is likely to increase over the next several quarters," he said.
One of things slowing progress with HAMP is documentation issues. He also pointed out that Radian has a 16.1-to-1 risk-to-capital ratio, well below the 25-to-1 ratio a number of states mandate. If it can't write new MI policies because of its risk to capital ratio, the parent company is preparing to reactivate its Amerin Guaranty subsidiary.

Mr. Quint said Radian is working on reducing that ratio even further. This includes using commutations, potentially using reinsurance, and maximizing capital from its financial guaranty operation.

During the question-and-answer portion, Mr. Quint commented on the future of private mortgage insurance and the secondary market.

"We think that anything that comes out in terms of the future of Fannie and Freddie and the private mortgage market is going to likely include mortgage insurance, because I think mortgage insurance has demonstrated that it has done exactly what it's supposed to do.

"So it's highly unlikely in our minds that this whole thing becomes a government - right now FHA is writing a lot of business but I don't think the FHA itself, servicers, lenders, certainly not us, want that to be the norm for the future. So we are certainly encouraged," Mr. Quint said.

As for the future of the company, he said during the Q&A, "We got to keep adding new business. The new business is very, very profitable. That helps our situation greatly. Certainly our risk to capital management is really important, but we have got a number of things that we still have to positively impact the risk to capitalize as well as we have got Amerin just in case to continue writing business."

FBR Capital Market analysts Steve Stelmach and Amy DeBone maintained their market perform rating on Radian after the presentation. Noting that the company said October and November delinquencies were coming in lower than expected.